VALEANT PHARMACEUTICALS INTERNATIONAL ACQUISITION ATTEMPT OF ALLERGEN INCORPORATED

THE DEAL – FINANCIALS

Cash/Share – $48.3 and Exchange Ratio – 0.83

• Initially VALEANT offered this amount which valued the company at around $47 billion but after rejection the offer was increased to $49.4/ share which valued the company at $56 billion USD.Ownership:

43% ALLERGAN and 57% VALEANT• VALEANT offered substantial premium of 45%

to ALLERGEN and later it was made public that William Ackman has 9.7% of the shares of ALLERGEN (when he increased his shareholding from 5% to 9.7%)

THE DEAL – THE PARTIES

Deal (dated 22/04/2014)

ALLERGEN

VALEANT

Pershing

Square Capital

Michael PearsonVALEANT

(CEO)

William AckmanPershing

Sq. Capital

David Pyott

ALLERGEN (CEO)

THE DEAL – THE PARTIES…

Canada-based specialty pharma companyFocus on expanding products through acquisitions, with little expenditure on R&D. Known to cut R&D spends of companies it acquiresMade atleast 34 purchases since 2010. Notable takeovers: Obagi Medical Products Inc., Bausch & Lomb and Solta Medical Inc.Market value has risen 848% since 2008 as Valeant emerged as one of the fastest growing pharma companiesHigh leverage and short-term revenue gain orientation has put their strategy under scrutiny

Multi-specialty healthcare company, with flagship products in the areas of eye care, neurosciences, medical dermatology and urologicsHigh R&D focus (17% of revenue), has been fending off acquisition from Valeant, not only on account of undervaluation but also a completely different business model

THE DEAL – VALEANT VS ALLERGAN

THE DEAL – CONTEXT• Following its aggressive acquisition strategy, Valeant has set sight on its biggest deal so far – the takeover of Allergan – a maker of skin products, including Botox. • Allergan Inc. (AGN), the subject of takeover speculation last year when its stock price dipped, would complement Valeant’s interest in skin and eye care• Allergan rejected multiple rounds of offers claiming it was undervalued, while callling Valeant business model unsustainable, refusing to sell at a price lower than $200 per share•While Allergan has not actively sought other bidders, focusing instead on creating shareholder value through cost cuts, the bid has taken dramatic twist with Actavis emerging as a bid rival with its offer of $190 per share

THE DEAL – CONTEXT…• The aggressive strategy for VALEANT can be given as the following: Aggressive acquisition strategy by VALEANT• Together with ALLERGAN, VALEANT would have captured a major portion of the ophthalmologic medicines market. This can be shown by the following info graphic:Rank as per Revenue Company (Sales ‘13)(in billion)

1 Alcon 10.2 USD2 Valeant & Allergen 6.30 USD3 Johnson & Johnson 2.90 USD4 Regeneron 1.60 USD5 Roche 1.50 USD6 Cooper Vision 1.30 USD

THE DEAL – SYNERGIES• Annualized cost synergy opportunity of $2.7 billion USD with revenue synergy and tax savings• The $2.7 billion USD cost synergy included the following components:• $1.8 billion USD on Selling, General and

Administrative Costs (SG&A) which included • Rationalizing US and corporate HQ and

eliminate regional HQ• Decentralization and align to VALEANT

advertising• $0.9 billion USD on R&D cost synergy which

included• Invest on low risk projects• Rationalize R&D infrastructure

• Revenue synergies included• Acceleration of ALLERGAN in emerging

markets• Acceleration of ALLERGEN OTC drugs and

additional product opportunity

THE DEAL – IMPACT ON MARKET

THE DEAL – IMPACT ON MARKET…

THE DEAL – TAKEOVER DEFENSES• Alleged that Valeant’s model is unsustainable• Constant attacks on VALEANT’s business performance to convince the shareholders that their stock is not to be bought • Share buyback to increase the price per share – Flip in poison pill where the investors (shareholders and not the acquirer) has the right to buy shares at a discounted price • Filed Lawsuit against VALEANT citing violations to federal securities laws that prohibit insider trading, fraudulent practices & failure to disclose legally required information.• Pershing Square purchased ALLERGAN stock and

securities valued at $3.2 billion• Even though Valeant established understanding

of non-public takeover intentions

THE DEAL – TAKEOVER DEFENSES…• Acquiring stock damaged value appreciation

worth $1.2 billion• ALLERGAN demands court declaration for

violation of insider trading and disclosure laws for Valeant and Pershing also repealing Pershing Square’s purchase of ALLERGAN shares• ALLERGAN requested preliminary injunction

against Valeant prohibiting VALEANT & Pershing for exercising rights & benefits associated with ALLERGAN shares• ALLERGAN and VALEANT engaged in a bidding

war for the acquisition of SALIX Pharmaceuticals• ALLERGAN brought a White Night, ACTAVIS

Pharmaceuticals for saving it from the unsolicited takeover by VALEANT

THE DEAL – RESULT

THE DEAL – RESULT…April 22: Valeant Proposes to acquire Allergan for $48.30 in Cash and 0.83 Shares of Valeant Stock for Each Allergan Share

May 28: Valeant Substantially Increases Merger Proposal For Allergan

Aug 1: Allergan lawsuit against Valeant, Pershing Square cites securities violations

Sep 24: Valeant threatens suit against Allergan over a potential deal with Salix Pharmaceutical

Oct 8: Actavis plans new merger approach for Allergan Inc at close to $200/share

May 12: Allergan rejects Merger proposal saying it is undervalued

May 30: Valeant And Pershing Square Make Revised Offer For Allergan Contingent On Good Faith Negotiations

Aug 18: Valeant extends expiration of offer to acquire Allergan to December 31 from the original Aug 15

Sep 30: Allergan’s statement “Valeant’s offer is grossly inadequate and substantially undervalues Allergan”

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